Absorption and Variable Costing: 

Variable Costing and Absorption Costing Income Statements; Reconciliation of Absorption Costing Income with Variable Costing Income; Advantages and Disadvantages of Absorption Costing and Variable Costing; Variable Costing and the Theory of Constraints; Impact of JIT Inventory Methods.

Learning objectives:

1. Explain how variable costing differs from absorption costing and compute unit product costs under each method.

 2. Prepare income statements using both variable and absorption costing.

 3. Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

After studying this chapter students will be able to:

1. Explain how variable costing differs from absorption costing and compute unit product costs under each method.

 2. Prepare income statements using both variable and absorption costing.

 3. Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.